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Catastrophe Bond |
Also found in: Wikipedia | 0.06 sec. |
Catastrophe Bond A high-yield debt security backed by insurance premiums. Insurance companies issue catastrophe bonds in order to raise funds for hypothetical insurance payouts resulting from one or more stated events such as floods or fires. The bondholder receives coupons from what the insurance company collects in premiums. However, if the insurance company suffers a loss from a payout of one of stated events, the obligation to repay the bond is either relaxed or forgiven. The main advantage to a catastrophe bond, despite the stated risk, is the fact that it offers a high yield without much regard for the performance of the broader economy because people and institutions will almost always set money aside for insurance premiums. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| 59 billion in catastrophe bonds matured in the second quarter of 2009, bringing the year-to-date total of matured risk principal to just more than $2. At the time when it was more difficult to float new issues and when interesting packages were being offered in the secondary market, Munich Re itself actively invested in catastrophe bonds. Entitled Cat Bond Update: First Quarter 2009, the report indicated that catastrophe bonds continued to be important tools for risk and capital managers, with three bonds coming to market in the first quarter of 2009, totaling $575 million in fresh capital. |
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